This 2013 article “How Much Money Would It Take to Eliminate Poverty” (http://prospect.org/article/how-much-money-would-it-take-eliminate-poverty-america) addresses this question. The answer then was $175 billion. This is a ridiculously small number in the context of a $16 trillion GDP.
As someone who is on the homeowners gravy train I was stuck by this part of the article:
“The utterly ridiculous tax expenditures directed toward the disproportionately affluent class of people called homeowners—mortgage interest deduction, property tax deduction, exclusion of capital gains on residences—by themselves sum to $115.3 billion in 2012.”
Of course we live in a society that knows that poor people are poor because they are shiftless, drug addled and lazy. We certainly can’t reward those people with any help. Meanwhile the rich and corporations are worthy recipients of government handouts without fear that we will be corrupting them.
I’ve often thought it would be a salutary exercise if we handed out these tax breaks at a universal government payout office. Here, everyone receiving funds from the government would line up. As they received their check a big sign above the window would flash out the amount of their check. I think people on SSI would be outraged at how their measly few hundred dollars a month compared to the payouts to the rich and corporations.
So much of this is a question of what and whose priorities are being met by government action/inaction. Presently we don’t have a political system even vaguely responsive to the vast majority of Americans. In fact it is serving the rich and corporations quite admirably.
“There” is our current situation in which our government has been bought by the rich and corporations, over 80% of the population has not had a pay raise in 40 years and the public sphere, schools, parks, our infrastructure, really anything not behind the gated walls of private wealth, is being starved in the name of free market ideology. The American promise that hard work, pluck and a bit of luck can bring success to anyone, regardless of their rank at birth, is an empty myth. If you are born poor you will die poor. Even if you are middle-class, there is a significant chance that you will sink and at any rate you will always struggle just to keep that middle-class status.
The rich and corporations have waged a 40 year class war. At this point they have won all of the battles and continue to take home the spoils.
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The values of capitalism, especially as expressed through free market (neoliberal) ideology, have come to dominate how we organize our lives. Silicon Valley and the tech sector is busy celebrating the “gig” economy. Companies have simply stopped hiring employees and now conduct much of their work using “temps”, “1099ers”, part-time contract workers. The companies, and the champions of free markets, tout this as a wonder of flexibility and opportunity. For gigers not being recognized as an employee means that they lose out on all sorts of direct and indirect benefits long part of the contract between employers and employees: minimum wages, overtime benefits, health insurance, workers compensation for those hurt on the job, unemployment benefits for those who are laid off, proof of employment for those trying to rent or get a loan, and, perhaps most significantly, lower taxes (workers who are “independent contractors” have to pay the employer’s share of payroll taxes, thats an additional 7.7%). Part-time employees have no regular schedule, in many cases no regular place of work, no regular contact with other employees, or even a job at all. They are the ultimate commodity, entirely replaceable with very few contingent liabilities for companies.
American higher education long ago became an essential part of the corporate state and therefore focus for application of free market ideology. As the accompanying chart shows, in 1975 the contingent faculty (full-time non-tenure, part-time and graduate assistants) made up 55% of the academic workforce.
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As the presidential campaign of 2016 fades away and the Trump Era begins, we find a national scene without any real discussion of the facts of jobs and unemployment and what the future might bring. Trump and others talk about bringing manufacturing back to the US. No plan, plausible or otherwise, has ever been mentioned for how to accomplish this. The Democrat are hardly better. Much has been made and continues to be made of the role various trade agreements have had in the loss of manufacturing jobs. Even Bernie Sanders can do no better than talking about creating millions of good paying jobs through a national infrastructure program. It is laudable to fix the infrastructure that has become third world, but that is not a long-term jobs strategy.
There are structural changes in the capitalist economy that must be understood and accepted as fact. Lets begin with a few examples. US steel production, one of those lost American industries, is now as high as it was at the beginning of the 1960s.
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The Rise and Fall of American Growth: the US standard of living since the Civil War by Robert J. Gordon is a weighty book in every regard. At 762 pages it is a heavy lift – not beach reading or even bed-time either. But I found it almost a page turner. It is very well structured and written. None of the fussiness or obscurantist language one often finds in academic works. The central point of the book is that during the period from 1870 to 1970 the US economy grew at an extraordinary and we will not see a return to that rate for some pretty fundamental reasons.
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The relationship between our financial services industry, our government, and us, ordinary citizens who have repeatedly suffered the consequences of the avarice and incompetence of this industry, has always been troubled. Booms, busts, crashes, bubbles, depressions, inflation. Since the beginning of the 2008 Great Recession we have hoped that the government would return to applying some real rational restraints on the financial system. To be honest, with both political parties deep in the pocket of the industry, this is probably merely wishful thinking.
The Secret recordings of Carmen Segarra
While you are listening to this report of regulators captured by the industry they are paid to supervise, think of the endless series of Wall St and corporate chieftains who have worked for every President of our life time. So, don’t miss the current This American Life story about the Federal Reserve: “The Secret Recordings of Carmen Segarra” ((http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra))
photo by Patricia Wall/ NYTs
The new book, Flash Boys, by Michael Lewis has reignited the discussion of how our financial markets are rigged by high frequency trading. From my 2012 note:
To turn back to HFTs, why do we need this kind of transaction? How do they contribute to economic growth? These activities are by definition a zero sum game. They are like every other form of gambling a zero sum game. There are winners and losers, but no incremental gain for the economy. Other than enriching the HFTs at cost to others with smaller computers and fewer PhDs on staff what do we get for allowing these activities? Potentially catastrophic destabilization of financial markets? Where is the upside for society as a whole? Isn’t a primary purpose of any economy to increase the size of the pie, not just to redistribute existing wealth?
We should demand that our financial markets serve their fundamental purposes – connect investors with those who can deploy those resources to create new products and services and enable the flow of these goods and services. To call holding financial instruments whether stocks, bonds, or other assets for mere seconds investments is to beggar the mind. Government needs to step in to penalize economic activity that looks like gambling and certainly does not “grow the pie”. A sliding scale of transaction costs (aka a tax) could bring this to a screeching halt. There are sure to be complexities in how to implement such a strategy. But, if at every step we ask how a financial transaction contributes to economic growth at a systemic level, solutions will appear. Right now we have financial markets that are not only rigged but so complex and non-transparent that we are certainly setting ourselves up for future calamities like that which struck us in 2008.
photo courtesy of Chance Agrella, photographer
An article in the NY TImes today reports that NY Attorney General Schneiderman is pursuing various information providers, Thomson Reuters in the immediate case, for their practices of selling market sensitive information preferntially. Those paying a premium get information several minutes before its release to the general public. This is more evidence that Wall St (standing in here for the financial sector as a whole) is largely a fixed gambling racket. Not much different than a casino.
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In recent years a standard bit of political rhetoric in the US has included references to “the job creators”. This most usually flows along the lines of higher taxes on the wealthy will injure the job creators. Or, government regulation is crushing the job creators. The presumption of course is that the wealthy, the 1% in the current rhetoric, create jobs (and those not created by the wealthy are created by small business – this being another, long term part of our political discourse). Thus, government must do nothing that will upset the wealthy.
It must be noted that we have already had a large experiment with the obverse of this “don’t disturb the wealthy” policy. What if we made the wealthy even richer by lowering their tax rates? By simple logical deduction, this would incent them to invest more and create more jobs. Well, the Bush II years proved that this does not happen. Despite the largest tax reductions on the wealthy in US history, job creation under Bush II was worse than in any presidency back to Hoover.
At some level believing the wealthy to be the job creators seems natural enough. They have lots of money to invest and in their desire for more they will be out investing in new projects that per force must create jobs. Without the aid of real analysis, I have always been a bit suspicious of this idea. Wealthy people have their money managed for them by large financial institutions and financial specialists. Very few of them are directly involved in any business other than the business of worrying about whether their financial advisors are ripping them off or doing stupid things. Why do real work when you can have your advisors leverage the vast scale of your wealth to get special deals on bundled high return financial instruments.
Along comes a wealthy guy, Nick Hanauer, with a five minute TED Talk debunking this job creator mythology that is more soundly thought out than my ramblings.
BTW – Hanauer’s analysis is straight forward Keynesian economics. We have a demand problem. US corporations have record sums of cash on the balance sheets. Yet they are not investing it. The answer is lack of demand, increased sales to generate the virtuous cycle of profits followed by jobs. Though both the US and Europe are busy proving again that our economic problems are not going to be solved by austerity, debt reduction policies, other countries, like South Korea, have proved anew the merits of Keynesian remedies. Unfortunately, we have no one in the elites who have the political will to do what has worked before very reliably. They used to call it “pump priming”. Now our pump is dry, unemployment and underemployment is perniciously eating away at our society.
It is fairly widely known that income and wealth inequality in the US is as high or higher than at any time except perhaps the Robber Baron period at the end of the 19th century. Lots of articles and books explain how this has come about over the last 30 years. In a recent NYTimes Magazine article, “The Purpose of Spectacular Wealth, According to a Spectacularly Wealthy Guy” by Adam Davidson, we are even offered an affirmative defense of this by a buddy of Mitt Romney from Bain Capital Edward Conrad.
Conrad… “aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conrad writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off.”
But, leaving aside the obvious disconnect between any rational measure of value add by the wealthy and their incomes and holdings, does economic inequality really matter? Is it just that those of us in the not wealthy class, now branded The 99%, are jealous of all the toys of the wealthy? Their four or five houses, countless cars, airplanes, and all the rest?
Are their some measurable consequences to economic inequality?
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